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Home > Resources > Mergers & Acquisitions > M&A Benefits Due Diligence: Failure To File A Form 5500 Is An Expensive Problem To Acquire

M&A Benefits Due Diligence: Failure To File A Form 5500 Is An Expensive Problem To Acquire

January 30, 2019 by Employee Benefits Law Group

In a merger or acquisition, late or never-filed Form 5500s can be an expensive benefits problem to acquire and a sign there may be other issues with the company’s benefits plan. It’s a potential problem we efficiently solve with M&A benefits due diligence.

Transcript

The Department of Labor and the IRS require most employee benefit plans to file an annual Form 5500 to report the plan’s financial activities for the year.

Buyers, sellers and their transaction attorneys are often unaware of the penalties the DOL and IRS can impose if the form is filed late. In the worst-case scenario, the DOL’s “maximum” penalty could add up to almost $800,000 if the form is one year late. It’s rare, but possible.

Even the DOL’s less harsh “standard” penalty for late filing caps out at over $18,000 per year. And, for a plan that never filed a 5500, but should have, that penalty caps out at $30,000 per year.

In a merger or acquisition scenario, late 5500s (or 5500s that were never filed at all) can be an expensive benefits problem to acquire. And it is frequently a sign that there are other issues with the company’s benefits plan that need attention.

This is why our clients find that an employee benefits attorney can be invaluable during the sale of a business. We help sellers find and correct mistakes that might otherwise impact the purchase price – often with greatly reduced penalties or no penalties at all.

For buyers, we bring employee benefits issues to light before they become the buyer’s problem so that they can negotiate correction costs into the deal.

Whether you’re getting ready to sell your company or buy one, we’ll help you find and correct employee benefit plan mistakes to keep your transaction on track to closing.

If you need specific guidance on this topic, let’s start a conversation. 

This podcast is for general informational purposes only.  It does not create an attorney-client relationship between Employee Benefits Law Group and the listener or reader and does not constitute legal advice for a specific situation.

Thanks for listening.

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Filed Under: Mergers & Acquisitions Tagged With: Blog

About Employee Benefits Law Group

Employee Benefits Law Group is a deep and diverse team of experts working to make your life easier and improve your outcomes in every aspect of employee benefits. Our clients know we listen, probe and understand their challenges and objectives. We ask the questions they didn't know needed to be asked. They count on us to deliver solutions that become part of their company's overall success.

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EDITOR’S NOTE: We did the best we could to make sure the information and advice in this article were current as of the date of posting to the web site. Because the laws and the government’s rules are changing all the time, you should check with us if you are unsure whether this material is still current. Of course, none of our articles are meant to serve as specific legal advice to you. If you would like that, please call us at (916) 357-5660.

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